How this guy is tokenizing real assets into cryptocurrency

A photo of Valentin Preobrazhenskiy.

This article is part of Tech in Asia’s partnership with The Jay Kim Show where we publish the revised transcripts from the show’s podcast interviews with top entrepreneurs. This is heavily revised from the original show transcripts. For the full interview, go here.

Cryptocurrencies are all the rage these days, but I haven’t invested in any currency—mainly due to its highly speculative nature and the lack of fundamental basis for price discovery. I also think that the future of bitcoin as a currency relies solely on the transaction volume’s acceptability.

But I got excited this week as I interviewed Valentin Preobrazhenskiy, CEO of LAToken, a multi-asset tokenization platform. They allow anyone to tokenize real assets to be traded like any other currencies. Tokens can be backed by anything from precious metals, rare and fine arts, to even blue-chip companies such as Apple, Google, and Tesla.

Preobrazhenskiy explained to me how it works. Here’s my interview with him.

How did you get into cryptocurrencies?

I traded equities for 15 years, and I worked at hedge funds for seven years. I was director of research at a Swiss hedge fund for a US$200 million portfolio, and then I founded my own hedge funds. So, I know in detail how crypto markets work. I love this.

I see that cryptocurrencies are transforming financial systems. In order to create a new currency, you just need smart contracts and blockchain, which are all operational. You make it in a few minutes and replace infrastructures built for centuries like central banks and the Federal Reserve. You can just issue tokens which have built-in property rights, and this works fast. This is very cost-efficient.

How did you come up with the idea for your business?

I was thinking about bitcoin. I agree that it’s a bit volatile. Price discovery is difficult because it is based on the future usage of bitcoin. This is a problem for a currency, as it is important to have a stable user case where so many people are using it.

In most cases, people have current account balances in cryptocurrency. More people having wallets and storing coins in those wallets mean more demand for the coins.

There’s also a competition between bitcoin and fiat currencies. The latter has large-scale effects, which is its advantage, while the former works in niches where people have problems with fiat currencies. But these niches are not big and are sometimes risky. This is why bitcoin is volatile.

If you have more stable user cases, growth will also be steady. We believe that the biggest user case for cryptocurrencies is to start trading real assets in crypto and not just in niche transactions. We want to make a big user case where Ethereum, bitcoin, and LAT are used to trade trillions of dollars in real assets.

Can you walk us through the process?

Let’s take the Mona Lisa as an example. If the owner of the Mona Lisa decides to tokenize it to make it liquid, he or she can apply on our site. We will then make a preliminary sale of tokens and link it to the asset. Then, after investors express sufficient interest, we start the process.

What is interesting is how the link works. Token holders will get the cash equal to their share in the asset. Let me remind you that this is not a utility token. It is available only in regions where it is appropriate and do not contradict local regulations.

So, this token is linked with a settlement date when the owner gets the cash. Alternatively, the token owner may not claim for cash and just roll over the token and get a second one, replacing the previous token.

What does the future look like for cryptocurrencies?